544
Chapter 36
Sole Proprietorships and
Franchises
Case 36.1
Slip Copy, 2006 WL 1517775 (N.D.Ill.)
GARDEN CITY BOXING CLUB, INC., a California Corporation, Plaintiffs,
v.
Luis DOMINGUEZ, Individually and d/b/a Antenas Enterprises, Defendants.
No. 04 C 0351.
moot. For the reasons stated herein, GCB’s Motion for Summary Judgment is granted.
I.
BACKGROUND
The following facts are taken from GCB’s Local Rule 56.1 submission. Because Dominguez failed to file his own Rule 56.1
CHAPTER 36: SOLE PROPRIETORSHIPS AND FRANCHISES 545
establishment. Antenas Enterprises is authorized to sell and install satellite systems under a contract with DISH Network. After
installing systems, Antenas Enterprises transmits the satellite receiver information, including the address and account name, to
DISH Network for further processing.
On January 17, 2002, through its employee Luis Garcia (hereinafter, “Garcia”), Antenas Enterprises incorrectly identified the
customer account at 220 Hawthorn Commons, Vernon Hills, Illinois 60061 as “Jose Melendez,” a residential designation.
A. Summary Judgment
Summary judgment is appropriate if “the pleadings, depositions, answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment
as a matter of law.” . The Court must view all the evidence and any reasonable inferences therefrom in the light most favorable to
the nonmoving party.
See
.
1. Respondeat Superior
GCB argues that Antenas Enterprises is liable for Luis Garcia’s actions under the doctrine of
respondeat superior.
Dominguez
asserts that Garcia was an independent contractor and therefore, Antenas Enterprises cannot be vicariously liable for his actions.
Under the doctrine of
respondeat superior,
an employer is liable for injuries to third persons resulting from acts by an employee
which, although not directly authorized or ratified by the employer, are incidental to the class of acts which the employee is hired to
2. Antenas Enterprises Violated
GCB contends that Antenas Enterprises violated by listing Mundelein Burrito as “Jose Melendez” when it forwarded the complete
work order to DISH Network for processing. According to GCB, Antenas Enterprises knew the location was a restaurant, but listed
it as a residence. In support of its argument, GCB attaches photographs of the restaurant located at the end of a commercial strip
mall. GCB argues that the signage, structure and location of Mundelein Burrito made it impossible to confuse with a residence.
account and broadcast it to patrons of the establishment.
Id.
at 997-98. The court found defendant violated the Act because he
allowed the broadcast to be available to a commercial establishment without proper authorization.
Id.
at 999.
*4 states “[a]n authorized intermediary of a communication violates the Act when it divulges communication through an electronic
channel to one other than the addressee.” Mundelein Burrito was clearly a commercial establishment. The structure of the building,
an exterior identification sign, and its location in a strip mall made this obvious. Mundelein Burrito paid only the residential fee for
amount not more than $100,000. . The court must award attorneys’ fees to the prevailing party. .
GCB argues that the Antenas Enterprises failure to properly list Mundelein Burrito resulted in four separate violations. According to
the license fee charged for each of the four fights that were illegally broadcast by Mundelein Burrito, the proper amount would have
been $20.00 times the maximum fire code occupancy (46) or $3,680.00. Instead, due to the improper identification of the account
as residential, Mundelein Burrito paid only $184.40 to broadcast the four events. GCB did not receive any of the $184.40.
1. Luis Dominguez is Liable Individually
*5 GCB argues Luis Dominguez is personally liable for Antenas Enterprises’ violation of of the Act. The term “person” in the Act
means an
“individual,
partnership, association, joint stock company, trust, corporation or governmental entity.” (emphasis added);
see also
(individuals may be personally liable under the Act).
Case 36.2
Pa.,2009.
LJL Transp., Inc. v. Pilot Air Freight Corp.
599 Pa. 546, 962 A.2d 639
Supreme Court of Pennsylvania.
Court’s decision to that same effect.
LJL Transportation Inc. and its owners, Louis Pektor III and Leo A. Decker, (“Appellants”) appeal the order of the
Superior Court of Pennsylvania which upholds the order of the Court of Common Pleas of Northampton County
granting summary judgment in favor of Appellee, Pilot Air Freight Corporation (“Pilot”) on its counterclaim for breach
of contract. Pilot is a company based in Lima, Pennsylvania and is engaged in the air-freight forwarding business
which originated in the Pilot system.
The franchisee is required to report at the end of each business day all business it transacted during that day. Upon
receipt of these daily business reports, Pilot prepares and sends invoices to the franchisee’s customers, and then
collects payment directly from the customers. After collecting the customer payment, Pilot deducts a royalty fee and
other costs specified by the franchise agreement, and it forwards the remainder of the funds to the franchisee. Pilot
and which were based on a wide array of evidentiary materials submitted by Pilot in support of its cross-motion for
summary judgment,FN1 in early January 2001, Pilot learned the following information from employees of LJL. Since
1999, Appellants had been deliberately and systematically diverting freight shipments, required under the terms of the
franchise agreement to be shipped through the Pilot Air Freight system, to Northeast Transportation (“Northeast”), a
separate trucking company which was a direct competitor of Pilot and which was owned by Pektor and Decker. In its
323-327a. Upon learning of LJL’s conduct, Pilot immediately sent a letter to Appellants, dated January 4, 2001,
FN1. These include sworn affidavits of a Pilot vice president, sworn affidavits of present Pilot employees who
were also former employees of LJL, sworn depositions of an operations manager for LJL, Decker, Pektor, and
a former part owner and employee of LJL, Robert Zisko, as well as party admissions and shipping invoices.
Appellants responded by filing a complaint against Pilot in the Court of Common Pleas of Northampton County,
asserting breach of contract and related causes of action. Pilot filed an answer and counterclaim, an amended
Based on its review of both motions and the aforementioned accompanying evidentiary materials, the trial court
concluded Appellants admitted to engaging in conduct that breached the contract and had no defense to their actions.
The trial court flatly rejected Appellants’ sole assertion that they had an unqualified right to cure under a provision of
the franchise agreement, paragraph 23(c), which provides:
Cure.
This Agreement immediately terminates upon receipt by Franchisee of written notice of termination from Pilot.
parties’ franchise agreement created an implied covenant in which the franchisee *644 agreed “not to engage in
schemes or gimmicks that deprive the franchisor of its percentage,” and additionally found the franchisee had
breached this covenant by hiding revenue from the franchisor.
Id.
at 8 (quoting
Southland,
41 F.Supp.2d at 246-247).
Here, the trial court regarded the relationship between Appellants and Pilot to be “fundamentally the same” as that
which existed in
Southland.
Trial Court Opinion, 12/9/03, at 8. The court determined the only way Pilot could ascertain
550 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
in breaching the contract, namely, deliberately not reporting shipments to Pilot “for pricing reasons” so that Appellants
“could make more money off the shipment” and offering bonuses to employees who would run shipments through
Northeast and not Pilot.
Id.
at 9. The trial court accepted Pilot’s argument that Appellants had no right to cure due to
the “dishonest and untrustworthy nature of their actions.”
Id.
at 10. In support of its decision to grant Pilot’s motion for
summary judgment, the trial court also cited
Larken v. Larken City Partner., Ltd.,
589 N.W.2d 700 (Iowa 1998), in
which the Iowa Supreme Court found that a management company, which had misappropriated rebates due under an
FN2. Appellants had previously voluntarily withdrawn one of their other claims in their complaint, and the trial
court also granted Pilot’s cross-motion for summary judgment with respect to Appellants’ remaining claims.
The Superior Court affirmed in a published decision authored by the Honorable Richard Klein.
LJL Transp., Inc. v.
Pilot Air Freight Corp.,
905 A.2d 991 (Pa.Super.2006). The court noted with approval the cases relied on by the trial
court, specifically the aforementioned
Larken
and
Froelich
decisions, as well as
Leghorn v. Wieland,
289 So.2d 745
court observed the issue was not raised before the trial court in Appellants’ motion for summary judgment, and Pilot
had no notice to defend on that issue. Moreover, the court opined that had the issue been raised, it was possible Pilot
could have discovered and presented evidence of significantly more diversions than the $35,000 which it had
uncovered. The court also noted this argument was not presented in Appellants’ statement of matters complained of
on appeal, filed pursuant to Pa.R.A.P.1925, and it was therefore waived for that reason as well.
Id.
at 993.
Pennsylvania law and, thus, is construed as all other contracts-to effectuate the plain meaning of all of its provisions,
including termination provisions. Appellants maintain that rescission procedures specified in contracts must be strictly
followed and, therefore, termination provisions of contracts must likewise be stringently adhered to if they are to have
legal force. They suggest that a plain reading of the language of paragraph 23(c) of the franchise agreement
establishes a mandatory requirement that Pilot give its franchisee an opportunity to cure a default within 90 days of
authorized by Pilot, or Franchisee operates another business in conjunction with the franchised business;
(viii) Franchise[e] conducts himself in a manner that detracts from or brings into disrepute Pilot or the Pilot name or
mark.
* * *
(xvii) Franchisee fails to submit accurate invoices, daily business reports and other statements or documentation in
FN3. Appellants further assert, as they did in the Superior Court, they could have cured their breach by
repaying what they termed “the
de minimus
financial sums” owed Pilot from a diversion of the freight and by
removing the individual responsible for the diversions. As discussed above, the Superior Court found this
issue waived for the reasons cited in its opinion, and, regardless, it was not encompassed by our order
granting review.
to paragraph 30 of the agreement, which provides:
*647 Pilot’s failure to insist upon strict compliance with any provision of this Agreement shall not be a waiver of its
right to do so, any law, custom, usage or rule to the contrary notwithstanding. Delay or omission by Pilot respecting
any breach or default shall not affect its rights respecting any subsequent breaches or defaults. Pilot’s election to
exercise any remedy available by law or contract shall not be deemed a waiver of nor preclude exercise of any
[2][3][4][5] We begin our analysis by noting our Court’s well settled standard of review of the trial court’s entry of
summary judgment. An order of a trial court granting summary judgment may be disturbed by an appellate court only
if the court committed an error of law,
Capek v. Devito,
564 Pa. 267, 270, n. 1, 767 A.2d 1047, 1048 n. 1 (2001); thus,
our standard of review is
de novo,
and our scope of review is plenary.
401 Fourth Street Inc. v. Investors Group,
583
Pa. 445, 453, 879 A.2d 166, 170 (2005). The entry of summary judgment is proper whenever no genuine issue of any
Commonwealth of Pennsylvania,
585 Pa. 131, 143, 888 A.2d 616, 623 (2005). When the words of an agreement are
clear and unambiguous, the intent of the parties is to be ascertained from the language used in the agreement,
Steuart v. McChesney,
498 Pa. 45, 49, 444 A.2d 659, 661 (1982), which will be given its commonly accepted and
plain meaning,
J.K. Willison, Jr. v. Consol Coal Co.,
536 Pa. 49, 54, 637 A.2d 979, 982 (1994). Additionally, in
determining the intent of the contracting parties, all provisions in the agreement will be construed together and each
of a contract relieves the non-breaching party from any continuing duty of performance thereunder.
Berkowitz v.
Mayflower Securities,
455 Pa. 531, 534-535, 317 A.2d 584, 586 (1974) (citing 6 Williston,
A Treatise on The Law of
Contracts,
§ 8[64] (3d. ed.1962)). It is equally well established, that “[a] party also may not insist upon performance of
the contract when he himself is guilty of a material breach of the contract.”
Ott v. Buehler Lumber,
373 Pa.Super. 515,
541 A.2d 1143, 1145 (1988) (citing 17 Am.Jur.2d
Contracts
§ 425; Murray,
Contracts
§ 215 (2d. Rev Ed.1974)).
conduct constituting a breach of a contract between a fertilizer manufacturer and a storage and distribution firm.
Under the contract, the distributor agreed to operate a facility which would store and bag the fertilizer for shipment to
the manufacturer’s customers. The distributor was required to fill each bag to a weight of 50 lbs, plus or minus one
half pound. The contract also contained a termination provision which provided that if either party were to default “in
the performance or compliance with any of the covenants, agreements, terms or conditions” of the agreement, and
contract. The manufacturer subsequently appealed to the Fifth Circuit Court of Appeals. In that appeal, the distributor
asserted, as a defense to the manufacturer’s claim of a unilateral right of termination, the failure of the manufacturer
to provide notice and opportunity to cure in accordance with the termination clause of the contract. A panel of the
Court of Appeals for the Fifth Circuit rejected that argument and reversed.
In its opinion, the court first noted that Mississippi followed the general principle of contract law that if a party commits
554 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
Olin,
576 F.2d at 647 (citing,
inter alia,
Williston,
A Treatise on The Law of Contracts,
§ 842, 165 n. 1 (3d. ed.1962)).
The court deemed the
Williston
view as the most consistent with the law of Mississippi regarding the effect of material
breaches, and likewise consistent with the policy embodied in its commercial code requiring good faith and honesty in
the performance and enforcement of contractual relations.
Id.
at 648. Consequently, the court did not regard the
FN4. This characterization was derived from the court’s interpretation of Section 1266 of the 1962 edition of
Corbin on Contracts
which stated in relevant part: “The time and manner of exercising a power of termination
may be specified in the contract; in such case an attempt to exercise it otherwise will be ineffective.”Professor
Arthur Corbin,
Corbin on Contracts
§ 1266, at 65 (1962). However, in the 1997 supplement, the commentator
discusses with approval the ultimate holding of
Olin,
which, as detailed
infra,
endorses the contrary
curable breaches.
Corbin on Contracts
§ 1266, at 23 (Supp.1997) (emphasis original). In the most recent 2008 edition of that
treatise, the commentator affirmatively clarifies that
Corbin
endorses
Olin’s
holding as “correct and in
accord with this treatise.” 13
Corbin on Contracts,
§ 68.9, n. 5 (Rev’d ed.2003).
Subsequently, in
Larken, supra,
the Iowa Supreme Court endorsed and followed the holding of
Olin.
In
Larken
the
The franchisor countered by pointing out the franchisee engaged in dishonesty that went to the very essence and
fundamental purpose of the contract.
The Iowa Supreme Court agreed with the franchisor. Consistent with the teaching of
Olin,
the court rejected the view
that the agreement’s termination provision barred the franchisor from immediately terminating the agreement for the
franchisee’s material breach that struck directly the heart of the agreement:
FN5. For a discussion of the evolving views of the
Corbin
treatise on this point, see
supra
note 4.
Larken,
589 N.W.2d at 704-705 (quoting
Corbin
§ 1266, at 23 (Supp.1997)).
Courts in other jurisdictions have likewise concluded that, in the event of an incurable breach, the non-breaching party
FN6. The cases cited by Appellants in their brief,
see
Appellants’ Brief at 31-32, in an attempt to demonstrate
that courts of other jurisdictions will enforce cure periods of agreements, even in instances of incurable
breaches, do not support this claim, nor do they contravene or contradict the great weight of authority
previously discussed in this opinion. In
Manpower v. Mason,
377 F.Supp.2d. 672 (E.D.Wis.2005), the court
FN7. Pennsylvania has statutory provisions concerning termination of franchises for the sale of automobiles,
malt beverages, petroleum products and motor vehicle accessories.
See
63 P.S. §§ 818.8, 818.11–818.14,
818.15; 47 P.S. § 4–431(4); 73 P.S. § 202-3.
Under general contract law principles, it thus appears that, at least in most jurisdictions, a contractual provision
requiring an opportunity to cure prior to termination does not bar immediate termination based on a breach that
goes to the essence of the contract. These same principles can be applied to the franchise context. Most franchise
agreements anticipate this precise issue by providing a notice and cure period for ordinary breaches, but permitting
FN8. Contrary to Appellants’ suggestion, the cases of
Wright v. Bristol Patent Leather,
257 Pa. 552, 101 A.
844 (1917), and
Accu-Weather v. Prospect Communications,
435 Pa.Super. 93, 644 A.2d 1251 (1994), do
not compel a different result. In both cases, the parties attempting to terminate their obligations under
agreements were not doing so because of any egregious or fraudulent conduct of the other contracting party,
which constituted a vital and essential breach of the contract. Instead, they were attempting to terminate their
Case 36.3
130 S.Ct. 1251, 176 L.Ed.2d 36, 78 USLW 4181, 10 Cal. Daily Op. Serv. 2548, 2010 Daily Journal
D.A.R. 3150, 22 Fla. L. Weekly Fed. S 147
Supreme Court of the United States
MAC’S SHELL SERVICE, INC., et al.
which they complained had not compelled any of them to abandon their franchises and even though they had been offered and
had accepted renewal agreements. We hold that a franchisee cannot recover for constructive termination under the PMPA if the
franchisor’s allegedly wrongful conduct did not compel the franchisee to abandon its franchise. Additionally, we conclude that a
franchisee who signs and operates under a renewal agreement with a franchisor may not maintain a claim for constructive
nonrenewal. We therefore reverse in part and affirm in part.
I
A
FN1. Courts sometimes describe these three types of agreements as the “statutory elements” of a petroleum franchise.
See,
e.g., Marcoux v. Shell Oil Prods. Co.,
524 F.3d 33, 37, n. 1 (C.A.1 2008).
To enforce these provisions, a franchisee may bring suit in federal court against any franchisor that fails to comply with the Act’s
restrictions on terminations and nonrenewals. See § 2805. Successful franchisees can benefit from a wide range of remedies,
FN2. Shell Oil Products Company LLC, another party in this litigation, is a wholly owned subsidiary of Shell Oil Company.
See Brief for Petitioners in No. 08-372, p. iii.
558 CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW
In 1998, Shell joined with two other oil companies to create Motiva Enterprises LLC (Motiva), a joint venture that combined the
FN3. The dealers also claimed that Shell and Motiva had violated the Uniform Commercial Code, as adopted in
Massachusetts, by setting unreasonable prices under the open-price terms of their fuel-supply agreements with the
dealers. The jury found in favor of the dealers on this claim, and the Court of Appeals affirmed. 524 F.3d, at 51. That issue
is not before us.
After a 2-week trial involving eight of the dealers, the jury found against Shell and Motiva on all claims. Both before and after the
FN4. Because resolving this question is sufficient to decide these cases, we need not address Shell and Motiva’s
alternative argument that the PMPA does not embrace claims for constructive termination at all. Several Courts of
Appeals have held that the Act does create a cause of action for constructive termination. See,
e.g.,
524 F.3d, at 44-45
(case below);
Clark v. BP Oil Co.,
137 F.3d 386, 390-391 (C.A.6 1998);
Shukla v. BP Exploration & Oil, Inc.,
115 F.3d
849, 852-853 (C.A.11 1997). Others have reserved judgment on the issue. See,
e.g., Abrams Shell v. Shell Oil Co.,
343
F.3d 482, 486-488 (C.A.5 2003);
Portland 76 Auto/Truck Plaza, Inc. v. Union Oil Co
.
of Cal.,
153 F.3d 938, 948 (9th
Cir.1998). We leave the question for another day.
A